A “For Sale by Owner” sign on a neighborhood fence or handwritten on a sign in the front yard, I guess, does have a certain amount of appeal. It summons up mental images of a simple, direct relationship: there are no middle men, just straight talk and fair dealing with the “One in Charge”! And in fact, in many walks of life, dealing directly with the owner can be a plus. When you’re recommending a retail outlet to friends, telling them that you know the owner strengthens your endorsement, maybe even gets you a discount, but RARELY in Real Estate.
So when you cruise by a sign announcing a local, neighborhood For Sale by Owner property—a “FSBO”—you certainly wouldn’t be alone if you were tempted to walk up and knock on the door. Buying a home directly from its owner should be a way to purchase a house at the lowest possible price, what with no real estate professionals getting involved, Right?
That’s the fantasy, and although those assumptions are theoretically possible, in reality, homes being put up for sale by their owners represent a temptation that many experienced home buyers avoid. They have more than one reason.
1. Owners Often Ask for Too Much Money
The principal reason that the For Sale by Owner sign went up in the first place is probably because the landowner wants to avoid paying real estate sales fees. The commissions are completely negotiable but in the majority of listings on the MLS, the total commission is “somewhere around 5-6% of the sales price, typically with half going to the seller’s broker, and half to the buyer’s broker. Unfortunately, “For Sale by Owner” homes quite often carry higher prices simply because the owners do not know how to determine the true fair market value. Even in this information age, easily finding out EXACTLY what area homes have sold for is not as easy for the public to figure out as you would initially think, so they basically end up guessing on price (usually “high”). In some cases owners are convinced any property of theirs is a special exception to the market. In other situations, some “For Sale by Owner” signs go up precisely because the owner didn’t like what a professional broker’s comparable market analysis revealed, and then they blindly move forward, with no guidance, and ask whatever “wild number” they decide on.
2. Pertinent Information May Go Missing
Disclosure laws are not getting any less cumbersome, especially in the State of Maryland, but owners who aren’t familiar with their strict requirements can innocently (or less innocently) fail to toe the line. When significant unseen damage or relevant history is not disclosed, the buyer can wind up footing the bill long afterward. Buyers have some legal recourse, but that results in an expensive, drawn out process, rarely with any winners, besides of course the attorneys. Understanding your rights, getting a home inspection, and following the correct process is crucial in avoiding big problems further down the line.
3. It’s Just Not Convenient to You!
Sellers who eschew the services of the real estate professionals have accepted a lot of responsibilities that come with trying to sell a home. Of course, they have to keep on top of their regular responsibilities at the same time. That can make things inconvenient for prospective buyers. When both parties use real estate agents, visits are scheduled in a professional (i.e., predictable) manner. When owners become sellers, though, visiting hours tend to reflect the owner’s lifestyle needs. When buyers can’t visit during business hours or when the owner has a family obligation, it can add extra strain. Likewise, when the scheduling of inspections is difficult or any of the strict paperwork deadlines aren’t met…it’s one major reason that explains the NAR’s finding that the percentage of “For Sale by Owner” offerings have collapsed from 19% to 9% since 1991. It’s just very “dangerous” for all parties involved.
With so many disadvantages, it makes sense for buyers to focus on homes sold by agents instead of owners, because so much can go wrong. With transparently justifiable prices, better information and procedural clarity all helping you land the best buy, it should be easy to cruise by those FSBO signs.
